DEC 11, 2013 10:44am ET

Jumbo Rate Inversion Continues After 10 Basis Point Increase: MBA

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Rates for jumbo mortgages remain two basis points lower than for the 30-year conforming loan as both increased 10 bps for the week ended Dec. 6, according to the Mortgage Bankers Association.

But even with the higher interest rates mortgage application volume is up 1% on a seasonally adjusted compared with the previous week. The previous week’s data are adjusted for Thanksgiving.

The average contract rate for the 30-year conforming FRM is at 4.61% and for the 30-year FRM jumbo it is at 4.59%, the MBA says.

The Refinance Index increased 2% compared with the previous week. Refis are now 65% of new applications, up from 65% one week prior.

The seasonally adjusted Purchase Index increased 1% from one week earlier. On an unadjusted basis it is 37% higher than last week but 10% lower than the same week one year ago.

Application activity should remain flat the rest of the year as consumers concentrate on their holiday purchases, says Quicken Loans vice president Bill Banfield.

However, some consumers will still look to lock in a rate before the Federal Reserve pulls back on bond purchases and higher guarantee fees on conventional loans are implemented next year, he said.

The Fed is unlikely to make a change in policy at its next meeting, says Keith Gumbinger, vice president of HSH.com.

It could make a token move reducing Treasury purchases by $5 billion to signal that it intends to tweak the QE program. “Such a small move shouldn't disturb the financial markets much, so the risks of unwanted damage from making a change are slight," he says.

Meanwhile, the share of adjustable-rate mortgage loan applications, while just slightly above 8%, is at its highest level since July 2008. The average contract rate for the 5/1 ARM is 3.11%, up two bps.

On Federal Housing Administration-insured loans, the average contract rate is up 13 bps to 4.3%, while for the 15-year FRM, the rate is up 10 basis points to 3.66%.

Those rates are more indicative of the end of the last week, according to Zillow. For the first two days of this week, the average 30-year FRM rate trended back down and as of Tuesday it is at 4.26%, up one basis point from the previous week.

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